UAE’s cigarette tax ‘could lead to surge in tobacco smuggling’
ABU DHABI // Authorities will need to be on guard against a possible surge in the smuggling of illegal, unbranded, low-grade cigarettes after new tobacco taxes are imposed, said a former Interpol director.
A 100 per cent excise duty will take effect in the UAE and tobacco products will double in price across Gulf Cooperation Countries.
The tax on tobacco, energy drinks and soft drinks is expected be levied in the fourth quarter of this year.
The fallout could be a rise in illegally imported cheap “white cigarettes”, which are often laced with dangerous chemicals used to boost production.
It is estimated that these illegal imports currently account for 30 per cent of sales in the UAE and are often smuggled in from Iraq, Syria and Iran.
Cheap whites, or illicit whites, are products made legally in a factory with the approval of an overseas licensing authority, but may fall short of product standards in the country where they are ultimately sold.
A former assistant director of the illicit trade and anti-counterfeit sub-crime directorate at Interpol, said UAE border forces need to be extra vigilant to stem the flow.
“Criminals take advantage by offering illegal tobacco at a discounted price, leading to illicit trade and smuggling of cigarettes into the country,” said Michael Ellis, now a risk management consultant.
“Everybody loses: the Government loses revenues and credibility, retailers and manufacturers their income and consumers start buying cheap smuggled or illicit whites of unknown origin and quality.
“With the lack of knowledge and education about how illicit trade operates and to what extent it funds organised crime, it’s not surprising consumers buy from the black market.”
An electronic track-and-trace system uniquely identifying each imported package helps to fight tax evasion and illicit trade. Products are embedded with security features allowing goods to be declared as genuine and legally available for sale.
In February, Dubai Police said they had seized 7.6 million tobacco products last year, as part of a broader haul of counterfeit goods worth Dh1.6 billion, although the exact value of smuggled tobacco was not given.
“During my tenure battling against illicit trade, one of our main concerns was the public’s health. Unregulated tobacco products have no need to meet the standards set by government, so levels of nicotine and tar go unchecked, leaving the consumer with a potentially more harmful product.”
Tax increases on cigarettes that go well beyond inflation give smokers the incentive to seek cheap products.
Australia has one of the toughest stances against smoking. Annual excise increases of 12.5 per cent are set to continue until 2020, with a packet of cigarettes likely to cost in excess of Dh110 by then.
According to a 2015 report by the Australian Crime Commission, about 14 per cent of consumed tobacco is now bought under the counter.
Taxation is the biggest sanction yet in the government’s war on spiralling healthcare costs.
Other recent measures are compulsory health warnings displayed in Dubai’s shisha cafes to help reduce cancer rates and related diseases.
Dr Wedad Al Maidoor, director of the national tobacco control committee, has not ruled out further restrictions to help reduce smoking-related deaths by 2021.
“It is proven that a 10 per cent increase in tobacco tax usually results in a 5 to 10 per cent reduction in the number of smokers, particularly in those under 18 years old,” she said.
“There is a fixed strategy in place to reduce the number of smokers and on tobacco control. A key component of that is taxation, like we have seen in other countries like Australia and the UK.”
Authorities hope increasing the price of tobacco will help to deter young people from taking up smoking.
Advertising bans and packaging restrictions are strategies also being considered.
“I hope we can achieve this here, as we want standardisation across the GCC,” Dr Al Maidoor said.
“Hopefully with the support of the committee, we can move towards best practice we have seen in other countries.”
It is not clear how much revenue is expected to be generated each year through tobacco taxation, and a relaxation on the ban on the import of e-cigarettes is not part of anti-smoking plans.
Dr Walid Shaker, a consultant cardiac surgeon at Burjeel Hospital Abu Dhabi, welcomed the new measures.
“Health sector budgets here are under big pressure, and smoking is a major factor in that because we know it can produce cancer and various vascular diseases, strokes and heart disease,” he said.
“An increase in price can help limit use and help the health sector by reducing risk.”